Alphabet’s (NASDAQ:GOOGL) Google is preparing to test search and shopping ads within its AI overviews, which are AI-generated responses in search results. This feature will launch initially in the U.S., with ads displayed in a “sponsored” section, the company said in a blog post.
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It recently launched an AI overview feature to improve users’ search experience. The company has been looking beyond traditional search advertising and testing new formats, including integrating AI to drive ad sales.
AI to Accelerate Growth
During the Q1 conference call, company leadership noted increased search usage and user satisfaction among those utilizing the new AI overviews. Consequently, incorporating ads within AI overviews could boost overall ad sales.
In Q1, Google Search and other advertising revenues were $46.2 billion, up 14% year-over-year. The integration of AI, alongside its growing usage, is expected to further enhance Search and other advertising revenues in the coming quarters. Besides for Search, the Google Cloud segment’s revenue is growing at a solid pace, reflecting the increasing contribution from AI.
The company’s advertising and cloud revenues are poised to rise with continued AI integration. Additionally, its efforts to cut expenses will likely support margins and drive earnings growth.
Analyst Ronald Josey Weighs In
Citi analyst Ronald Josey believes that Google’s AI investments are enhancing the search experience, making it more personal and useful. This integration is expected to boost usage and drive ad sales.
On May 15, Josey, an analyst ranked amongst the top 1% of Street stock experts, reiterated his Buy rating on GOOGL stock, with a price target of $190, suggesting a 7.37% upside potential. (To watch Josey’s track record, click here).
Is Alphabet a Buy or Sell stock?
Alphabet stock is up over 42% in one year. Further, analysts are bullish about its prospects.
Alphabet stock has 32 Buys and five Hold recommendations for a Strong Buy consensus rating. Analysts’ average price target on GOOGL stock is $196.42, implying 10.44% upside potential from current levels.
